Retirement

How 401(k) Drives Inequality – The New York Times

This past January, another bipartisan collaboration—between Alicia Minnell, an economist in the Clinton administration who now serves as director of Boston College’s Center for Retirement Research, and Andrew Biggs, director of the American Enterprise Institute A senior fellow of K, a conservative. Think Tank – published a paper calling for reducing or eliminating the 401(k) tax benefit.

Their research found that it did not increase participation in the program, nor did it significantly increase the amount Americans were saving for retirement overall. It was mostly a gift only to high-income investors and an expensive one at that. He estimated that this deprived the Treasury of about $200 billion in revenue annually. He proposed reducing or eliminating the tax-deferred status of 401(k)s and using the extra income to supplement Social Security.

When I spoke with Biggs, he emphasized that he is not against 401(k)s. On balance, he thinks they’ve done a good job, and he also says some of the criticism leveled at him is no longer valid. For example, the do-it-yourself aspect is overrated: For example, most plans now offer target-date funds, which allocate your assets based on your age and goals. adjust automatically, freeing you from constantly adjusting your portfolio. He acknowledges that eliminating tax preferences can be politically difficult: The people who benefit most from them are also the people who write checks to campaigns. But he believes Americans can eventually be persuaded to give up the tax benefits. “If we say to people, ‘Look, we can cut your Social Security benefits or raise your Social Security taxes, or we can cut the useless subsidies that go to these rich people. who don’t need money’ – well, that’s a bit more compelling.”

Hassett told me that his work with Ghilarducci does not represent a relaxation of his faith in the free market. Quite the opposite: He sees government intervention to boost retirement savings as a necessary step to protect American capitalism. Heist has long been concerned that the country is moving toward socialism — the subject of his recent book — and that one reason is that so many Americans are economically disadvantaged and feel that the system Doesn’t work for them. Benefit

“They feel disconnected, and they’re disconnected,” Heist says. The government would be wise to help them save for retirement. “It will make them more likely to contribute to the success of the free enterprise system,” he says. “I think it’s important for long-term political stability that everyone has a stake.”

Jane Forbes is not economically disadvantaged, but many in her community struggle. Lorain, a city of about 65,000 on the shores of Lake Erie, never recovered from the loss of a Ford assembly plant and two steel plants. About 28 percent of Lorain residents now live in poverty. By the serious standards of its territory, Forbus is doing well. “I’m definitely privileged,” she says. Still, she knows that despite her diligent savings and careful budgeting, there’s a good chance she won’t be able to retire at age 65. They fear the prospect of being in the labor market as an elderly person. “Something like waitressing — past a certain age, it’s really hard,” she says. And she admits she finds it troubling that retirement can be such an unattainable goal for someone like her. “I think our system fails too many people,” she says.


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